Posted by Scott on March 19, 2002 at 23:04:50:
I think you are trying to over-analyze the thing. I suggest you concentrate more on how you could sweeten the deal more - have you really tested the limits of the seller to find out their bottome line? Also, if you are going to keep this long term, make sure you think through you up sides and your down sides (this is where you need to do your analysis). Ask how you can mitigate the downside before you get into the deal.
Need feedback, please! - Posted by Fletch
Posted by Fletch on March 19, 2002 at 15:32:48:
I have talked to the owner of a FSBO who has agreed to carry 5% on his three unit, and the asking price is 75k.
I am trying to figure out if this deal is going to pencil out.
There are two efficiency units and one two bedroom unit. It has seperate electric meters, off-street parking, and will be in move in condition before I take over the property. It is currently vacant, but there is plenty of demand for the rental units in the area. The units should be able to bring in rents of $275, $275, and $550.
gross operating income = $ 13200
less 35% for expenses, vacancy,
taxes, utilities leaves NOI $ 8580
CAP rate 8.7??
If I did 90-5-5 my down payment would be $3750.
Monthly payments on the first mort. 30yr 8% $495 X 12 = $5940
Payments on 2nd $3750 financed 3yrs with 10% =
$121 X 12 = $1452
7392
That leaves about $100 positive cash flow per month. When the second is paid off that would give me $221 positive cash flow per month.
I need a second opinion. Did I figure out the Cap rate correctly? It seems pretty low. Will a lender like Ed Garcia give me a 90% loan at 8%? Also, I came up with a yield of 33% on my down payment, is this right?
Thanks,
Dan Fletcher